Court: Utility can't defer fuel costs

The parent company of Ohio Edison cannot defer its increased fuel costs for three years and lump them into rates beginning in 2009, the Ohio Supreme Court ruled yesterday.

The parent company of Ohio Edison cannot defer its increased fuel costs for three years and lump them into rates beginning in 2009, the Ohio Supreme Court ruled yesterday.

In a 6-1 decision, the court found that the Public Utilities Commission of Ohio violated the state's 1999 electric-deregulation law in allowing FirstEnergy Corp. to put off an estimated $231 million in fuel costs and roll them into customers' rates from 2009 through 2034.

State regulators had approved FirstEnergy's request to defer the fuel costs as well as costs to upgrade its electrical-distribution systems as part of an effort to stabilize electrical rates in the wake of deregulation.

Akron-based FirstEnergy is the parent corporation of Ohio Edison, the Cleveland Electric Illuminating Co., Toledo Edison and utilities in Pennsylvania and New Jersey.

The Ohio Supreme Court struck down FirstEnergy's bid to defer fuel costs but upheld the Public Utilities Commission 's decision to allow the company to defer costs of upgrading its power-distribution network.

"Customer rates have not yet increased as a result of the deferred distribution expenses, nor has the commission determined that FirstEnergy will be able to recover these expenses," Justice Evelyn Lundberg Stratton wrote for the court.

Justice Paul E. Pfeifer dissented, contending that FirstEnergy should be barred from deferring any routine costs. He noted that regulators are supposed to set rates that allow utilities to keep up with routine maintenance rather than moving costs into the future.

"Although this practice may smooth out a utility's bottom line, the reality is that we are pushing expenses incurred today onto a later generation of taxpayers," Pfeifer wrote.

In distinguishing between the fuel costs and maintenance expenses such as removing vegetation and upgrading power lines, the court pointed to different types of evidence presented to the Public Utilities Commission.